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Title:	Firm performance and enterprise risk management implementation: the moderating effect of ownership structure
Authors:	Mohd Hafizuddin Syah Bangaan Abdullah (ZP00681)
Supervisor:	Hawati Janor, Assoc. Prof. Dr.
Keywords:	Risk management
Issue Date:	11-Sep-2017
Description:	Enterprise risk management (ERM) was introduced two decades ago to overcome the weaknesses in traditional risk management (TRM) practices. The silo-based TRM fails to count on the interrelation between risks, which then reduce the firm effectiveness in managing risk. Through the holistic approach of ERM, relevant risks and the interrelation between risks are identified comprehensively and coordinating these risks with firm risk appetite. Although these advantages lead to the increasing trend of ERM implementation, many firms have not implement ERM. It then inspires many studies to identify the determinant factors of ERM implementation. One of the important factors is firm performance. Past studies argue that poor firm performance induces ERM implementation to reduce earnings volatility. However, potential costs associated to ERM makes HPO approach more relevant to explain the ERM implementation. By emphasizing high performance and financial strength, HPO approach allows for generating more net cash flow to bear the high cost of ERM implementation. Therefore, this study examines the effects of firm performance on the ERM implementation in Malaysia. Considering the contingency theory, the effect of firm performance on ERM may contingent on other factors such as ownership structure as suggested by the managerial risk aversion and active monitoring hypothesis. Hence, this study also examines the moderating effect of ownership structure on the effect of firm performance on ERM. In addition, the industry effect is also observed due to the variant of ERM implementation across industries. This study employs static and lags logistic model for estimation of 435 non-financial firms listed on Bursa Malaysia for 13 years. The dependent variable, ERM is proxy by a dummy variable, Tobin's Q represents firm performance, and managerial and institutional ownership measures ownership structure. The main findings show a positive effect of firm performance on ERM implementation, which supports HPO approach and high firm performance is relevant to ERM implementation by improving the financial capability to bear the high cost of ERM implementation. The relationship is further strengthened by the lag model, which finds a strong positive effect of past firm performance and ERM implementation in the following year. As expected, the outputs from HPO sample reveals identical results. Consistent with managerial risk aversion and monitoring hypothesis, managerial ownership weakens the positive effect of firm performance on ERM, while institutional ownership strengthens the positive effect of firm performance on ERM. Ultimately, these findings support the contingency theory as the effect of firm performance on ERM implementation is contingent to ownership structure. Finally, subsample analysis suggests that full sample results are mainly driven by non-manufacturing sector and imply the presence of industrial effect between manufacturing and non-manufacturing sector. The findings of this study provide useful inputs for regulators to formulate policy direction of ERM, which needs to emphasize the importance of performance to encourage public listed firms to implement ERM. Furthermore, this study also contributes to the body of knowledge by confirming the existence of contingency variable in explaining ERM implementation. This finding is important and timely, given the lack of analysis on the moderating effect in the study of ERM.,Ph.D.
Pages:	170
Call Number:	HD61.M834 2017 tesis
Publisher:	UKM, Bangi
Appears in Collections:	Graduate School of Business / Pusat Pengajian Siswazah Perniagaan

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